11 Apr 2014

The current EU-US negotiations should be a wake-up call for African governments to be proactive and limit the burden that a trade deal of this magnitude will unquestionably bring along.

by Annie Mutamba

The 4th EU-Africa Summit has concluded with
leaders expressing their commitment to “develop globally competitive industries
that can succeed in today’s global markets”.

While the intercontinental trade regime is in
sore need of reform, the summit failed to provide the political momentum to
reinvigorate this relationship. Economic Partnership Agreements (EPAs), while not
on the official agenda, unsurprisingly invited themselves onto the sidelines of
the summit. It is now high time to consider the other side of the coin: a
transatlantic free trade deal currently negotiated between the European Union
and the United States could have wide-ranging impact on the overall African
economy.

With peace, security and governance on the
agenda of the EU-Africa Summit, there was no shortage of elephants in
the room. The Summit
declaration states “EPAs should be structured to ensure that trade
expands and that it supports growth of intra-regional trade in Africa”. It is indeed
a multifaceted issue, which deserves particular consideration in the current
international framework.

The United States and the European Union recently concluded their fourth round
of negotiations on the Transatlantic
Trade and Investment Partnership (TTIP), an ambitious trade deal designed
to reinforce ties between the two largest economies. If successful, the
transatlantic bloc would become the largest integrated market in the world,
with both sides already accounting for half of the world’s GDP and 30% of
global trade. The partnership would undoubtedly boost US and EU firms’ ability
to compete in other markets. Last but certainly not least, TTIP has the
potential to set the global trade agenda for decades.

Clearly TTIP is not a mere addition to the
current patchwork of international free trade agreements. EU’s main trading
partners – and African countries in particular – have an interest in how these
negotiations develop and in their ultimate outcome.

TTIP vs EPA vs coherence in the EU-Africa
trade regime

In the context of bilateral free trade
agreements, legitimate concerns are often raised regarding the impact on third
parties: a high degree of economic integration generally goes hand in hand with
significant trade diversion effects. Given its preferential access to EU
markets, Africa should keep an eye out for TTIP’s long-term implications, as it
would then have to compete with the world’s largest free trade zone in a
marketplace of 800 million of the world’s richest consumers.

TTIP’s ramifications go far beyond the
transatlantic region and, whatever the final scenario, the African economy will
have to deal with the consequences. North and West Africa – which share the
Atlantic with the USA and the EU - would be particularly affected, given their
extensive trade relations with Europe. Furthermore the Ivory Coast and Guinea can
expect detrimental effects as their exports into the EU are affected by the
USA. According to a study
commissioned by the Bertelsmann Foundation, Sub-Saharan Africa – which
currently accounts for 2% of global trade and clearly needs wider access to
developed consumer markets – stands to lose ground in the transatlantic market.

A wake-up call for African leaders to manage
the impact

African economies are changing fast and coming
on strong but they are still exposed and sensitive to changes in global trading
schemes.

Of course Africa will have no direct say in
the TTIP negotiations. However substantial implications can be foreseen for the
private sector, which has a fundamental role to play in Africa’s capacity to
compete at the global level. For African business leaders with international
ambitions, TTIP could come as an opportunity or a threat - either way ignoring
the current talks can be costly in the long-term. By way of example it can be
noted that new global trade rules might include ways to handle public enterprises,
labor laws and energy subsidies in international trade.

The current EU-US negotiations should be a
wake-up call for African governments to be proactive and limit the burden that a
trade deal of this magnitude will unquestionably bring along. African countries
are under pressure to sign comprehensive Economic Partnership Agreements (EPAs)
covering intellectual property rights, sanitary and phytosanitary standards,
public procurement, investment, and services – all areas revisited in TTIP.

A lot is at stake, including the added value of the Africa-EU partnership.
African leaders are facing a challenge of priority setting with strong policy
implications. Should they adopt a wait-and-see approach until they have a
better understanding of how TTIP, if successful, will roll out in practice? Or
take proactive steps to ensure that improved transatlantic ties do not come at
their expense? The clock is ticking.

On their way out of Brussels, African political
leaders should not turn a blind eye to this major issue – it is set to become
increasingly self-evident over time. And African economies definitely deserve a
fair deal.

Annie
Mutamba (@A_Mutamba) is Co-Founder of Meridia Partners
This is a guest post; views may not represent that of ECDPM